Retail electric competition rules out this week

THE Energy Regulatory Commission (ERC) will release the modified restrictions on the operations of Retail Competition and Open Access (RCOA) within this week, a high official
said.

“The commission was able to resolve all restrictions – revised rules on contestability,
The restrictions will be covered by an ERC Resolution which we shall release this week,” ERC Chairman and CEO Jose Vicente B. Salazar told reporters in an interview during the
Power and Electricity World Philippines 2016 event on Wednesday.

“RCOA represents the ultimate fulfillment of our reform initiatives. RCOA represents our
vision for an era in the very near future where electricity end-users can choose their electricity provider,” he said.

On March 8, the ERC issued the rules governing the issuance of licenses to Retail Electricity Suppliers (RES).

The rules prescribed additional requirements and criteria for RES license applicants and holders. The promulgation also lifted the suspension of the evaluation of RES licenses issued in 2013.

The promulgation of the revised rules for contestability is also forthcoming. The revised rules aims to clarify and establish the conditions and eligibility requirements for end-users in order to be part of the contestable market.

“It is also intended to set the threshold level for the contestable market to ensure that the efficient transition towards full contestability happens, while making sure that we continue to protect the consumer and enhance the competitive operation of the retail electricity market,” Salazar said.

But more importantly, it is the revised rules for contestability that spell out the timelines for the RCOA implementation.

With the adoption of the 2016 Retail Electricity Suppliers or RES Rules, and the upcoming promulgation of the Revised Rules for Contestability, the ERC deemed it appropriate to impose restrictions on the operations of distribution utilities and RES in the Competitive Retail Electricity Market.

“First, no distribution utility shall be allowed to engage in the supply of electricity to end-users in the contestable market unless such supply is made in its capacity as a Supplier of Last Resort,” Salazar said.

“Second, all local RES or distribution utilities that are currently engaged in the supply of electricity to end users in their franchise area shall wind up their business within three years from the effectivity of the rules. This means existing retail supply contracts or RSC entered into with their respective contestable customers shall remain valid until the expiration of said contracts subject to the winding down period,” he said.

This also means that no new retail supply contracts shall be signed, executed, and be allowed after the effect of the Resolution, and no renewal of retail supply contracts shall likewise be allowed.

“Third, no retail electricity suppliers shall be allowed to supply more than 30 percent of the total peak demand in the retail market,” Salazar said.

“Fourth, no retail electricity suppliers may transact more than 50 percent of its supply business with its affiliate contestable customers,” he said.

ERC will make a review of the market conditions within 24 months from the effectivity of the resolution, and shall revisit the said restrictions and adopt changes depending on the current market situation.

“With the success of each of these steps, we come closer to the full implementation of the RCOA,” Salazar said.

Currently, only large customers with an average peak demand of at least 1 Megawatt are allowed to choose their own suppliers of electricity, on a voluntary basis.

“Starting June 26 of this year, the ERC resolved to lower the threshold to 750 Kilowatts. Thus, customers with a peak demand of at least 750 kilowatts can contract with any RES on a voluntary basis,” Salazar said.

“Mandatory contestability for customers with peak demand of 1 MW will happen on December 26, 2016. For 750 kW and above, mandatory contestability is scheduled to take place 6 months after or on June 26, 2017. The lowering of the threshold to cover 500kW to 749 kW is set on June 26, 2018, subject to the review of the performance of the retail market by the ERC,” he said.

Retail aggregation is another aspect of retail competition that is seen to expand the array of choices available to the consumers. “Through retail aggregation, the joining of multiple end-users into a single purchasing unit will be allowed. This scheme is scheduled to be implemented by the ERC on June 26, 2018,” he added.